annual report 2014 - Al Ahlia Insurance

Transcription

ANNUAL
REPORT
2014
YOUR TRUSTED INSURER
Head Office
Branches
P.O.Box 5282, 4th Floor
Chamber of Commerce Building
Manama, Kingdom of Bahrain
Tel: +973 17225 860
Fax: +973 17224 870
email: [email protected]
website: www.alahlia.com
• Sitra(Sitra Mall, Ground Floor)
• Salmabad
• Riffa(Wadi al Sail)
• Riffa(Military Consumers Association)
C.R. No. 5091
Principal Bankers
• Ahli United Bank B.S.C.
• National Bank of Bahrain B.S.C.
Auditors
BDO
Contents
1
2
3
5
7
8
9
16
Profile
Mission and Philosophy
Financial Highlights
Board of Directors Profile
Management Profile
Organization Structure
Board of Directors Report
Financial Results 2014
His Royal Highness
Prince Khalifa Bin
Salman Al Khalifa
His Majesty
King Hamad Bin
Isa Al Khalifa
His Royal Highness
Prince Salman Bin
Hamad Al Khalifa
The Prime Minister of
The Kingdom of Bahrain
The King of
The Kingdom of Bahrain
The Crown Price
Deputy Supreme Commander and
First Deputy Prime Minister
Profile
The insurance industry, being part of
everybody’s daily life, is witnessing a new
evolution that revolves around the everchanging needs of the client. Appropriate
creative solutions are therefore designed
to meet these needs.
About Al Ahlia
We are one of the oldest public shareholding companies providing all classes of insurance in Bahrain. Having been established
in 1976, the company gained tremendous credibility in a highly
competitive market. In our continuous endeavor to provide the best
services to our clients, we have constantly made efforts to employ
human and technological resources to enhance our position and
performance.
Keeping in mind our commitment to becoming the leading insurer of
the nation, and being fully aware of the challenges ahead, we have
already seen the positive results of the ceaseless efforts of our staff
who are actively involved in creating social awareness about the
value of insurance, reaching the various segments of society.
We shall continue to explore the avenues to adapt our products
to suit the ever-changing needs of the society, and introduce new
products that would meet the needs of future lifestyles.
Al Ahlia Vision
To be the most trusted Insurance Company.
1
AL AHLIA INSURANCE 2014 ANNUAL REPORT
Mission and Philosophy
Al Ahlia Mission
Al Ahlia strives to offer increased security for the lives and lifestyles
of people living in Bahrain, through the constant training and adaptation of its employees to the latest developments in the industry,
thus being able to serve in the most professional manner.
At end analysis, we believe that the satisfaction of our customers is
the only true reflection of the success of our corporate strategies.
This underlying philosophy inspired the development of a committed, professional team, which operates within a dynamic and
invigorating working environment.
“Focusing on principles that have worked in the past, we harness
resources to meet the challenges ahead.”
Al Ahlia Philosophy
“Change” is the nature of time. The positive approach to change
is the adaptability to, and receptivity of new ideas, which depends
greatly on human interaction with the environment. The insurance
industry, being part of everybody’s daily life, is witnessing a new
evolution that revolves around the ever-changing needs of the
client.
Appropriate creative solutions are therefore designed to meet these
needs. In preparing to meet the challenges associated with the new
era ahead, our mission to offer the highest quality of services to our
customers continues to guide us, with an optimism that is typified
by our corporate identity that is abstracted from the elements of the
shell.
A symbol that reflects our commitment to offer protection and assurance for the future, to all our clients and one, which has remained
unchanged over the past many years. Through a process of continuous adaptation, innovation, transformation and confidence in our
renewal, we reaffirm our commitment to a better tomorrow.
2
Financial
Highlights
Gross Premium
10.78
BD Millions
Underwritting
1.22
BD Millions
Net Profit
1.70
BD Millions
3
Net Earned Premiun
5.17
BD Millions
Earning per share
27
Fils
Technical Reserves
7.04
BD Millions
4
Board of
Directors
Mr. Sofyan Adnan Khatib
Chairman
5
Dr. Osama Taqi AlBaharna
Deputy Chairman
Mr. Adel Hassan Alaali
Director
Mr. A.V. Babu
Director
Mr. Farooq Mahmood Arjomand
Director
Chairman
Mr. A.V. Babu
Director
Mr. Khatib holds a Bachelor of Arts specialized in Business
Administration & Hotel Administration. He has 30 years of
professional management & investment experience. Mr.
Khatib also holds directorships in DAMAC Group – Dubai,
Al Jazeira Services Company SAOG – Oman, Al Anwar
Ceramic Tile Company SAOG – Oman. He was appointed
by the Board in June 2004 as the director and re-elected to
the Board at the AGM in March 2012.
Mr. Babu holds a Bachelor’s degree in Science
and he is a Fellow member of the Institute of
Chartered Accountants of India. He has wide and
varied experience in the field of management and
investment analysis.
Dr. Osama Albaharna
Deputy Chairman
Dr. Albaharna holds a Doctorate (Ph.D.) in Computer
Engineering from Imperial College in the UK and Masters
and Bachelor Degrees in Computer Engineering from
McGill University in Canada. He has wide experience
in management, operations, and marketing of service
oriented organizations in Bahrain and Qatar. Dr. Albaharna
is a much sought-after IT and eCommerce consultant in
the region and has worked as Project Manager on many
strategic IT projects.
He is the Executive Director of Continental Office
Equipment & Systems W.L.L. and Taqi Mohammed
Albaharna Trading Establishment in Bahrain, Continental
Group in Qatar, and Continental Managed Print Services
in Dubai. Dr. Albaharna was first elected to the Board in
March 2003. He was last re-elected to the Board in March
2012
He has earlier served as Board member from 2006 to
2009 and re-elected in March 2012.
Director
Mr. Farooq graduated in Business Management from
the Seattle Pacific University, Washington - Seattle.
He started his career as a banker with HSBC, in
1984. He is one of the founding members of Amlak
Finance & Emaar Properties. He is the Chairman of
the Arjomand Group that consists of various Hotels,
Textiles, Travels, Hospitality and Technology services
companies. Arjomand Group has offices in Europe,
Far East & GCC countries.
He is also a Director and Vice-Chairman of the
Executive Committee of Amlak Finance, UAE. Mr.
Arjomand joined the Board of Al Ahlia in March 2012.
Mr. Adel AlAali
Director
Mr. AlAali holds a Bachelor in Science from North
Staffordshire University of UK and Bachelor in
Science from Aston University of UK. Mr. AlAali has
extensive business experience as director and Board
member in various industrial companies.
Mr. AlAali holds directorship in Al Aali House Limited,
Al Aali Management Limited, Bahrain Bulk Handling,
Bahrain Bulk Trade, Bahrain Precast Concrete,
Haji Hassan Group W.L.L, Sky Properties Limited,
United Cement Company, United Gulf Asphalt,
United Precast Concrete – Dubai and United Precast
Concrete – Qatar.
Mr. AlAali was first elected to the Board in
March 2000 at the annual general meeting of
the shareholders for a period of three years and
thereafter he was re-elected. His last re-election was
in March 2012
6
Management
Profile
Fadi Khatib
General Manager
S.Veera Pandian
Deputy General Manager
Mr. Khatib Is an Associate of the
Chartered Insurance Institute of
London, Chartered Insurance
Practitioner (UK) and holds Master in
Business Marketing & Management.
Holds a Post Graduate Degree in
Arts and is an Associate Member
of the Insurance Institute of India
Mr. Khatib has extensive experience
in Insurance Industry in the GCC&
Middle East, He was previously the
Manager of Bahrain Branch at Arabia
Insurance Company. He joined
Al Ahlia Insurance in December 2012.
7
Mr. Veerapandian has vast
experience in insurance industry
in very senior positions in
marketing as well as technical
departments. He joined Al Ahlia
Insurance in June 2002.
Organization
Structure
The basic organization structure of Al Ahlia Insurance
Board of Directors
Nominations &
Remunerations
Committee
Audit
Committee
Operations
Committee
Internal
Audit
General
Manager
Investments
Committee
Deputy
General
Manager
Marketing
Department
Motor
Department
Fire & General
Accident.
Marine & Aviation
Life and
Medical
Finance,
HR & IT
8
Board of Directors Report
The Board of Directors is pleased to present the 38th
Annual Report of the company to the valued shareholders
with the Balance sheet and Income statement for the
financial year ended 31st of December 2014.
Insurance Operations
The positive turnaround expected during the FY 2014, as indicated in the previous year Report was achieved.
Underwriting profit is increased from 847K to 1,215K by controlling loss ratios and claims.
Al Ahlia continues with the established principle of retaining healthy rates and sound underwriting norms.
Despite stiff competition and difficult business conditions we managed to curtail our drop-in business to 5.5% by
replacing lost clients with new and more profitable clients.
Investments
By prudently handling Investment portfolio, Al Ahlia has returned an Investment profit BHD 1.3 million as against BD
2.48 million done in 2013.
(in BHD ‘000s)
Gross Written Premium
Net Earned Premium
Net Claims Incurred
Management Expense
Net Commission Income
2014
2013
10,781
11,409
5,167
4,815
(3,864)
(3,704)
(546)
(543)
456
457
Underwriting (loss)/profit
1,215
847
Investment & Other Income
1,300
2,484
General & Administrative Expense
(819)
(815)
Net Profit
1,696
2,516
Result of various insurance activities before deducting general and administration expenses are as follows:
(in BHD ‘000s)
Fire, General Accident & Engineering
Marine & Aviation
2013
89
163
371
466
Life and Medical
142
105
Motor
611
289
Provision on insurance and reinsurance receivables
(79)
(177)
81
-
1,215
847
Movement in technical provision
Total
9
2014
Board of Directors Report contd.
Proposed Distributions
The amount available for appropriation is BHD 5,591,573
Net Profit for FY 2014 (before Directors Remuneration)
1,696,003
Directors Remuneration
(0)
1,696,003
Transfer to Statutory Reserve
(169,600)
1,526,403
Net Retained Earnings from previous year
4,065,170
Total Profit available for distribution
5,591,573
The Board of Directors submits for approval on the following appropriations to General assembly:
Transfer to Statutory Reserve
Cash Dividend of %40 on Paid up share capital
169,600
2,473,976
Directors Remuneration to be decided at AGM
Balance of Retained Earnings
3,117,597
THE BOARD OF DIRECTORS
26th Feb 2015
10
Medical Insurance
Personal Accident
Insurance
We have a number
of medical insurance
schemes to choose
from. Plans are
available for Individuals,
Families and for Groups
or Employees of
companies
Gross Premium 2014
BD Millions
We will take care of
you and your family in
case of any unfortunate
accident to your self. Our
comprehensive Personal
Accident Insurance Plan
will provide you with
financial support
10.781
Underwriting 2014
BD Millions
Property Insurance
We provide the right
insurance cover for
your valuable property.
Under the Personal
Lines products section
you can get the best
insurance protection for
your house, building and
contents.
11
1.215
Engineering
Insurance
Whether you are a
Contractor, Engineer,
Project Manager,
Consultant or a factory
owner, we have the
right cover you need.
Corporate
Governance
Report
Corporate Governance Report
The Bahrain Corporate Governance Code issued by The Ministry of Industry and Commerce, Kingdom of Bahrain,
became effective1 January 2011. Al Ahlia confirms the compliance of the code to all its stake holders.
Al Ahlia strongly believes that strong corporate governance principles form the basis for building the trust of all
stakeholders. In absolute consonance with the CBB guidelines, our corporate governance philosophy is based on the
following principles:
1. Maintain transparency and meaningful disclosure levels to enable the stakeholders to form a fair opinion.
2. Comply with the Law in letter and spirit.
3. Only absolute business requirements would design corporate structure.
Corporate Governance principles are practiced by the Board of Directors (‘the Board’) that also oversee how the
Management serves and protects the long-term interests of all stakeholders. Al Ahlia also has Operations, Investment,
Nominations & Remunerations committees that support the Board in accordance with the rules laid down by Central
Bank of Bahrain rulebook pertaining to public disclosure. The company makes the following additional disclosure in
respect of the constitution, profile of the Board of directors and management, various committees and organization
structure.
Composition of the Board
A Board of Directors elected by the body of shareholders in March 2012, currently consisting of Five members,
governs the company. All the Directors possess high-level professional skills, industry knowledge and expertise. The
appointment of the Directors has been approved by the Central Bank of Bahrain (CBB). They hold office for three
years and are eligible for re-election thereafter. The election for new members will be held during the Annual General
Meeting to be held on 31st March 2015.
They derive their powers from the Bahrain Commercial Companies Law 2001, the memorandum and the articles of
Association and the powers granted by the Body of shareholders at their general assembly. The key shareholding
pattern of the company is given in Note 21 of the financial report.
Directors’ Roles and Responsibilities
The roles and responsibilities of the Directors include:
• Establishing and reviewing Organizational Goals, objectives and policies.
• Evaluation and monitoring of Organization performance through various committees and approval of periodical
Financial Statements and Annual budgets.
• Ensuring that the Organization has met all the legislative and Regulatory requirements.
• Exercising the level of professional skill and care in carrying out their duties.
12
Directors
The newly constituted Board duly elected Mr. Sofyan Adnan Khatib as the Chairman and Dr. Osama Albaharna as the
Deputy Chairman of the Company.
1. Sofyan Adnan Khatib – The Chairman
Mr. Khatib holds a Bachelor of Arts specialized in Business Administration & Hotel Administration. He has 30
years of professional management & investment experience. Mr. Khatib also holds directorships in DAMAC
Group – Dubai, Al Jazeira Services Company SAOG – Oman, Al Anwar Ceramic Tile Company SAOG – Oman.
He was appointed by the Board in June 2004 as the director and re-elected to the Board at the AGM in March
2012 .
2. Dr. Osama Albaharna – Deputy Chairman
Dr. Albaharna holds a Doctorate (Ph.D.) in Computer Engineering from Imperial College in the UK and Masters
and Bachelor Degrees in Computer Engineering from McGill University in Canada. He has wide experience in
management, operations, and marketing of service oriented organizations in Bahrain and Qatar. Dr. Albaharna
is a much sought-after IT and eCommerce consultant in the region and has worked as Project Manager on
many strategic IT projects.
He is the Executive Director of Continental Office Equipment & Systems W.L.L. and Taqi Mohammed Albaharna
Trading Establishment in Bahrain, Continental Group in Qatar, and Continental Managed Print Services in
Dubai. Dr. Albaharna was first elected to the Board in March 2003. He was last re-elected to the Board in
March 2012
3. Mr. Adel AlAali – Director
Mr. AlAali holds a Bachelor in Science from North Staffordshire University of UK and Bachelor in Science from
Aston University of UK. Mr. AlAali has extensive business experience as director and Board member in various
industrial companies.
Mr. AlAali holds directorship in Al Aali House Limited, Al Aali Management Limited, Bahrain Bulk Handling,
Bahrain Bulk Trade, Bahrain Precast Concrete, Haji Hassan Group W.L.L, Sky Properties Limited, United
Cement Company, United Gulf Asphalt, United Precast Concrete – Dubai and United Precast Concrete – Qatar.
Mr. AlAali was first elected to the Board in March 2000 at the annual general meeting of the shareholders for a
period of three years and thereafter he was re-elected. His last re-election was in March 2012
4. Mr. A.V.Babu– Director
Mr. Babu holds a Bachelor’s degree in Science and he is a Fellow member of the Institute of Chartered
Accountants of India. He has wide and varied experience in the field of management and investment analysis.
He has earlier served as Board member from 2006 to 2009.
5. Mr. Farooq Mahmood Arjomand
Mr. Farooq graduated in Business Management from the Seattle Pacific University, Washington - Seattle. He
started his career as a banker with HSBC, in 1984. He is one of the founding members of Amlak Finance &
Emaar Properties. He is the Chairman of the Arjomand Group that consists of various Hotels, Textiles, Travels,
Hospitality and Technology services companies. Arjomand Group has offices in Europe, Far East & GCC
countries.
He is also a Director and Vice-Chairman of the Executive Committee of Amlak Finance, UAE. Mr. Arjomand
joined the Board of Al Ahlia in March 2012.
13
The year FY 2014 the Board of directors met Five times.
Name
26 - Jan - 2014 24 - Feb - 2014
14 - May - 2014 12 - Nov - 2014 attended
1
3
2
Dr. Osama Albaharna
4
3
Mr. Adel AlAali
4
4
1
5
Mr. A.V.Babu
4
Committees of the Board
The Board of directors has delegated their powers to the Operations Committee and Audit committee to assist them in
carrying out their directorial duties and to supervise more closely the management activities. All the committees were
restructured during the Board meeting held on 25th July 2011. All the committees’ activities are in line with their respective
Term of Reference document. The constitution, powers and the details of various committees are as follows:
Audit Committee
The Audit Committee is in charge of audit function of the company. The committee reviews the statutory auditor reports
on behalf of the Board. The internal auditor directly reports to the Audit Committee.
• Mr. Adel Hussain AlAali
- Chairman
• Mr. A.V. Babu
- Member
This committee met Two times during FY 2014.
Operations Committee
Empowered to act on behalf of the company to supervise the company’s insurance operations.
• Dr. Osama Albaharna
- Chairman
• Mr. A.V.Babu
- Member
This committee met Five times during FY 2014.
Investment Committee
Empowered to act on behalf of the company to take and Investment Decision.
• Mr. Sofyan Adnan Khatib
- Chairman
• Mr. Farooq Mahmood Arjomand
- Member
The Committee met Nine times during FY 2014.
Nomination and Remuneration Committee
To review and submit recommendations to the Board on the Nominations and Remunerations.
• Mr. Adel Hassan AlAali
- Chairman
• Mr. A.V. Babu
- Member
• Mr. Farooq Mahmood Arjomand
- Member
Dr. Osama Albaharna is nominated from the Board for Corporate Governance.
14
Capital Adequacy
The company regularly reviews the financial position of the company with respect to capital adequacy as required
by the Central Bank of Bahrain rulebook. The rulebook specifies that the Tier 1 capital should be at least BHD 5
million and that the available capital of the company should be adequate to cover the minimum solvency margin is
determined. Available capital and required solvency margin would depend on the financial position and the scale of
the operations of the company.
The capital of the company determined in accordance with the Central Bank of Bahrain rulebook as on 31 December
2014 as follows:
BHD (Millions)
Minimum Tier 1 Capital Required
5.00
Tier 1 Capital of the Company
14.18
Minimum solvency margin required
1.034
Available Capital of the Company
9.847
Accordingly, the available capital of the company is about 9.5 times the required solvency margin.
The Board and the management confirm and assure that the capital adequacy norms have been met on the date of
this report.
Compliance
The Company confirms to all its stakeholders that it had complied with all the regulatory requirements stipulated by the
Central Bank of Bahrain, Ministry of Industry and Commerce, Bahrain. As a listed company Al Ahlia also complied with
all the regulatory requirements stipulated by the Bahrain Stock Exchange.
Thanks and Appreciation
On behalf of our shareholders, the Board of directors would like to extend their sincere thanks and appreciation to His
Majesty the King Hamad Bin Isa Al Khalifa, The King of the Kingdom of Bahrain, His Royal Highness Prince Shaikh
Khalifa Bin Salman Al Khalifa, the Prime Minister and His Royal Highness Prince Shaikh Salman Bin Hamad Al Khalifa,
The Crown Prince and Deputy Commander-in-Chief of the Bahrain Defence Force and First Deputy Prime Minister of
the Kingdom of Bahrain.
The Board would also like to thank HE the Minister of Industry and Commerce and HE The Governor of Central
Bank of Bahrain for their continuous support to the insurance industry in Bahrain and all Ministers, the private sector
establishments and individuals who dealt with our company and placed their trust.
We also extend our thanks to all the distinguished shareholders for their trust and continuous encouragement to the
Board. Our Appreciation and sincere thanks go to the management and employees for their loyalty, dedication and
hard work.
THE BOARD OF DIRECTORS
26th Feb 2015
15
Financial statements 2014
16
Independent auditor’s report
To the shareholders of Al Ahila Insurance Company B.S.C.
Tel: +973 17 530 077
Fax: +973 17 530 088
www.bdo.bh
17th Floor,
Diplomat Commercial Office Tower
PO Box 787
Report on the financial statements
We have audited the accompanying financial statements
of Al Ahlia Insurance Company B.S.C. (“the Company”),
which comprise the statement of financial position as at
31 December 2014, the statement of profit or loss, the
statement of other comprehensive income, the statement
of changes in shareholders’ equity and the statement
of cash flows for the year then ended, and a summary
of significant accounting policies and other explanatory
information.
Management’s responsibility for the financial
statements
The management is responsible for the preparation
and fair presentation of these financial statements
in accordance with International Financial Reporting
Standards, and for such internal control as management
determines is necessary to enable the preparation
of the financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted
our audit in accordance with International Standards on
Auditing. Those standards require that we comply with
relevant ethical requirements and plan and perform the
audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the
financial statements. The procedures selected depend
on auditor’s judgment, including the assessment of the
risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk
assessments, we consider internal control relevant to the
entity’s preparation and fair presentation of the financial
statements in order to design audit procedures that
are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
17
Opinion
In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as
at 31 December 2014, and its financial performance and
its cash flows for the year then ended in accordance with
International Financial Reporting Standards.
Report on other legal and regulatory
requirements
As required by the Bahrain Commercial Companies Law
and the Central Bank of Bahrain (CBB) Rule Book (Volume
3), we report that: the Company has maintained proper
accounting records and the financial statements are in
agreement therewith; the financial information contained
in the directors’ report is consistent with the financial
statements; we are not aware of any violations of the
Bahrain Commercial Companies Law, the Central Bank
of Bahrain and Financial Institutions Law, the CBB Rule
Book (Volume 3 and applicable provisions of Volume
6) and CBB directives, regulations and associated
resolutions, rules and procedures of the Bahrain Bourse
or the terms of the Company’s memorandum and articles
of association having occurred during the year that might
have had a material adverse effect on the business of
the Company or on its financial position; and satisfactory
explanations and information have been provided to us by
the management in response to all our requests.
26 February 2015
Statement of
Financial Position
as at 31 December 2014 (Expressed in Bahrain Dinars)
Notes
ASSETS
2014
2013
Cash and bank balances
5
8,542,545
4,249,869
Statutory deposit
6
125,000
125,000
Available-for-sale investments
7
11,684,960
17,433,795
8
2,276,198
2,038,762
Insurance and reinsurance companies
9
1,501,381
1,406,561
Deferred reinsurance premiums
10
1,768,824
2,097,543
Deferred policy acquisition costs
11
316,400
225,920
Other receivables
Receivables
Policyholders
12
259,242
395,070
Outstanding claims recoverable from reinsurers
13
2,359,009
1,874,668
Property, plant and equipment
14
832,598
811,108
29,666,157
30,658,296
TOTAL ASSETS
LIABILITIES
Insurance funds
Outstanding claims reserve
15
6,667,636
6,149,950
Unearned gross premiums
16
4,391,549
4,650,733
Unearned commissions
17
429,669
413,439
Other technical provisions
18
-
81,053
Payables and other liabilities
Policyholders
304,053
230,768
1,157,197
1,667,754
19
1,151,484
1,071,597
20
131,568
115,087
14,233,156
14,380,381
Insurance and reinsurance companies
Other payables
Employees’ terminal benefits
TOTAL LIABILITIES
15,433,001
TOTAL NET ASSETS
SHAREHOLDERS’ EQUITY
16,277,915
Share capital
21
6,188,663
6,188,663
Statutory reserve
22
2,406,473
2,236,873
Investment fair value reserve
23
502,704
2,734,374
Revaluation reserve
23
747,312
747,312
5,591,573
4,374,417
(3,724)
(3,724)
15,433,001
16,277,915
Retained earnings
Treasury shares
21
TOTAL SHAREHOLDERS’ EQUITY
These financial statements, set out on pages 18 to 49, were approved for issue by the Board of Directors on
26 February 2015 and signed on its behalf by:
Sofyan Adnan Khatib
Chairman
Dr Osama Taqi AlBaharna
Deputy Chairman
Fadi Nabih Al Khatib
General Manager
18
Statement of
Profit or Loss
for the year ended 31 December 2014 (Expressed in Bahrain Dinars)
Notes
2013
10,781,387
11,409,258
Reinsurance ceded
25
(5,544,475)
(6,331,878)
Retained premiums
25
5,236,912
5,077,380
25
(69,535)
(262,672)
5,167,377
4,814,708
Adjustment in unearned premiums
Net premiums earned
(5,711,202)
(6,475,450)
Claims recovered from reinsurers
1,880,043
2,385,024
Outstanding claims adjustment - gross
(517,496)
453,183
Gross claims paid
15
Outstanding claims adjustment - reinsurance recoveries
Net claims incurred
25
484,342
(66,616)
(3,864,313)
(3,703,859)
Management expenses
25
Net commission income
25
456,320
456,711
Provision on Insurance and re-insurance receivables
25
(79,238)
(177,084)
25
(546,024)
(543,081)
81,053
-
(87,889)
(263,454)
847,395
Underwriting profit for the year
25
1,215,175
1,299,862
2,483,692
General and administrative expenses
27
(819,034)
(814,622)
1,696,003
2,516,465
Net investment and other income
Net profit for the year
Basic and diluted earnings per share
19
2014
25
Gross premiums
26
28
27fils
41fils
Statement of
other comprehensive income
Notes
2014
2013
1,696,003
2,516,465
Other comprehensive income
Items that may be reclassified into profit or loss:
Unrealised fair value (losses)/gains on available- for-sale investments
7
(1,511,625)
584,040
Net movement in the fair value reserve on imapairment losses on
available-for-sale-investments
7
294,205
-
Movement in fair value reserve on sale of available-for-saleinvestments
(1,014,250)
(929,865)
Total other comprehensive loss for the year
(2,231,670)
(345,825)
(535,667)
2,170,640
Total comprehensive (loss)/income for the year
20
Statement of changes
in shareholders’ equity
As at 31 December 2012
Notes
Total comprehensive
income for the year
Transferred to statutory
reserve
22
Statutory
reserve
investment
fair value
reserve
Revaluation
reserve
-
-
(345,825)
-
-
251,647
-
6,188,663
2,236,873
-
Share
capital
6,188,663
1,985,226
3,080,199
747,312
Retained
earnings
2,109,599
Treasury
shares
Total
(3,724)
14,107,275
2,516,465
-
2,170,640
-
(251,647)
-
-
2,734,374
747,312
4,374,417
(3,724)
16,277,915
-
(2,231,670)
-
1,696,003
-
(535,667)
169,600
-
-
(169,600)
-
-
Total comprehensive
income/
(loss) for the year
Transferred to statutory
reserve
22
Dividend for 2014
21
-
-
-
-
(309,247)
-
(309,247)
6,188,663
2,406,473
502,704
747,312
5,591,573
(3,724)
15,433,001
Statement of
cash flows
Operating activities
Notes
2014
2013
1,696,003
2,516,465
14
8,111
22,172
Adjustments for:
Depreciation
Dividend income
26
(624,950)
(774,715)
Interest income
26
(332,000)
(432,686)
Impairment losses on available-for-sale investments
26
780,305
-
26
(1,035,970)
(1,222,110)
(1,000)
-
Realised gains on sale of availablefor-sale investments
Realised gain on sale of property, plant
and equipment
Changes in operating assets and liabilities:
Receivables
Outstanding claims recoverable from re-insurers
Insurance funds
Payables and other liabilities
Provision for employees’ leaving indemnity, net
Net cash (used in)/ provided by operating activities
Investing activities
41,811
447,232
(484,341)
66,616
193,679
(59,807)
(285,385)
112,631
16,481
(408)
(27,256)
675,390
Dividend income received
26
624,950
774,715
Interest income received
26
332,000
432,686
Purchase of available-for-sale investments
7
(5,689,080)
(8,714,560)
9,461,910
9,845,100
(29,601)
(15,342)
Proceeds from sale of available-for-sale investments
Purchase of property and equipment
14
Proceed from sale of property, plant and equipment
Net cash provided by investing activities
Financing activities
1,000
-
4,701,179
2,322,599
Dividend paid
(381,247)
(38,572)
Net cash used in financing activities
(381,247)
(38,572)
Net increase in cash and cash equivalents
4,292,676
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
5
2,959,417
4,249,869
1,290,452
8,542,545
4,249,869
22
Notes to the
financial statements
1. Organisation and activities
Al Ahlia Insurance Company B.S.C. (“the Company”) is a public shareholding company registered with the
Ministry of Industry and Commerce in the Kingdom of Bahrain and operates under commercial registration
number 5091 obtained on 17 August 1976.
The Company is licensed to carry out insurance and reinsurance of all risks.
The registered office of the Company is in the Kingdom of Bahrain.
2. Basis of preparation
Statement of compliance
The financial statements have been prepared in accordance with the International Financial Reporting Standards
(“IFRS”) as promulgated by the International Accounting Standards Board (“IASB”), interpretations issued by
the International Financial Reporting Interpretations Committee (“IFRIC”) and the requirements of the Bahrain
Commercial Companies Law, Decree Number 21 of 2001, the Central Bank of Bahrain and Financial Institutions
Law 2006 and the insurance regulations set out in Volume 3 and applicable provisions of Volume 6 of the
Insurance Rulebook issued by the Central Bank of Bahrain.
Basis of preparation
The financial statements have been prepared using going concern assumption under the historical cost
convention, modified by the remeasurement of available-for-sale investments and freehold land at fair market
value at the statement of financial position date.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise judgment in the process of applying the Company’s
accounting policies. The areas requiring exercise of judgment in applying Company’s accounting policies are
disclosed in Note 4 to the financial statements.
Standards, amendments and interpretations issued and effective in 2014 but not relevant
The following new standards, amendments to existing standards and interpretations to published standards
are mandatory for accounting periods beginning on or after 1 January 2014 or subsequent periods, but are not
relevant to the Company’s operations:
Standard or
Interpretation
Title
Effective for
annual periods
beginning on
or after
IAS 32
Financial Instruments – Presentation
IAS 36
Impairment of Assets
1 January 2014
1 January 2014
IAS 39
Financial Instruments: Recognition and Measurement
1 January 2014
IFRS 10
Consolidated Financial Statements
1 January 2014
IFRIC 21
Levies
1 January 2014
Improvements/amendments to IFRS 2010/2014 cycle
Improvements/amendments to IFRS issued in 2010/2014 cycle contained numerous amendments to IFRS that
the IASB considers non-urgent but necessary. ‘Improvements to IFRS’ comprise amendments that result in
accounting changes to presentation, recognition or measurement purposes, as well as terminology or editorial
amendments related to a variety of individual IFRS standards. The amendments are effective for the Company’s
annual audited financial statements beginning on or after 1 January 2014 with earlier adoption permitted. No
material changes to accounting policies are expected as a result of these amendments.
23
Notes to the
2. Basis of preparation (continued)
Standards, amendments and interpretations issued but not yet effective in 2014
The following IFRS and IFRIC interpretations issued/revised as at 1 January 2014 or subsequent periods have
not been early adopted by the Company’s management:
Standard or
Interpretation
Effective for
annual periods
beginning on
or after
Title
IAS 16
Property, Plant and Equipment
1 July 2014
IAS 19
Employee Benefits
1 July 2014
IAS 24
Related Party Disclosures
1 July 2014
IAS 38
Intangible Assets
1 July 2014
IAS 40
Investment Property
1 July 2014
IFRS 1
First Time Adoption of International Financial Reporting Standards
1 July 2014
IFRS 2
Share Based Payment
1 July 2014
IFRS 3
Business Combinations
1 July 2014
IFRS 7
Financial Instruments – Disclosures
IFRS 8
Operating Segments
IFRS 9
Financial Instruments – Classification and Measurement
IFRS 13
Fair Value Measurement
IFRS 14
Regulatory Deferral Accounts
1 January 2015
1 July 2014
1 January 2015
1 July 2014
1 January 2016
There would have been no change in the operational results of the Company for the year ended 31 December
2014 had the Company early adopted any of the above standards applicable to the Company, except for the
adoption of IFRS 9 which would impact the classification and measurement of certain financials assets.
Early adoption of amendments or standards in 2014
The Company did not early-adopt any new or amended standards in 2014.
3. Significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements is set out below. The
policies have been consistently applied to all the years presented, unless otherwise stated.
INSURANCE OPERATIONS
Gross premiums
Gross premiums represent the total insurance business underwritten during the year.
Unearned premiums
Unearned premiums represent the portion of net retained premiums relating to the unexpired period of
coverage. Unearned premiums are calculated on the sixth method for marine cargo and the twenty-fourth
method for other classes of business.
24
Notes to the
3. Significant accounting policies
INSURANCE OPERATIONS (continued)
Reinsurance
In the ordinary course of business, the Company cedes insurance through reinsurance contracts. Such
reinsurance arrangements provide for greater diversification of business, allow management to control
exposure to potential losses arising from large risks, and provide additional capacity for growth. A significant
portion of the reinsurance is affected under treaty, facultative and excess-of-loss reinsurance contracts.
Amounts receivable from reinsurers are estimated in a manner consistent with the claim liability associated with
the reinsured parties.
The Company assesses its reinsurance assets for impairment at each reporting date. If there is objective
evidence that the reinsurance asset is impaired, the Company reduces the carrying amount of the reinsurance
asset to its recoverable amount and recognises that impairment loss in the statement of profit or loss.
Insurance receivables
Insurance receivables are stated at cost less an allowance for uncollectible amounts. An estimate for
uncollectible amounts is made when collection of the full amount is no longer probable. Bad-debts are writtenoff as incurred.
Claims paid
Claims settled during the year are charged to the statement of profit or loss net of reinsurance and other
recoveries.
Deferred commission and acquisition costs
Commission expense and other acquisition costs incurred during the financial period that vary with and are
related to securing new insurance contracts and/or renewing existing insurance contracts, but which relate
to subsequent financial periods are deferred to the extent that they are recoverable out of the future revenue
margins.
Outstanding claims
Provision is made for all outstanding claims, including claims Incurred But Not Reported (IBNR). The provision
for outstanding claims is based on estimates of the loss which will eventually be payable on each unpaid
claim, established by management in the light of available information and on past experience and modified
for changes in current conditions, increased exposure, rising claims cost and the severity and frequency of
recent claims as appropriate.
Any difference between the provisions at the statement of financial position date and settlements and
provisions in the following year is included in the statement of profit or loss for that year.
Liability adequacy test
At each reporting date, the Company assesses the adequacy of its insurance liabilities using current estimates
of future cash flows under insurance contracts. If the assessment shows that the carrying amount of its
insurance liabilities is inadequate in the light of estimated future cash flows, the entire deficiency is recognised
in the statement of profit or loss.
Commission income
Commission income is recognised when premiums are ceded in accordance with treaty arrangements and
facultative covers.
25
Notes to the
3. Significant accounting policies (continued)
INSURANCE OPERATIONS (continued)
Commission expense
Commission expense is accounted for at the time policies are written.
Unearned commission
Unearned commission income is deferred based on the sixth method for marine cargo and the twenty-fourth
method for other classes of business.
INVESTMENT ACTIVITIES
Investments intended to be held for an indefinite period of time, which may be sold in response to needs for
liquidity or changes in interest rates, are classified as available-for-sale investments. These are included in
non-current assets unless management has the express intention of holding the investment for less than 12
months from the statement of financial position date, or unless they need to be sold to raise operating capital,
in which case they are included in current assets. Available-for-sale investments are initially recorded at cost
and subsequently re-measured at their fair values. Unrealised gains and losses arising from changes in the fair
value of available-for-sale investments are recognised in the statement of other comprehensive income. The
fair value of investments listed on active markets is determined by reference to quoted market prices. The fair
value of securities listed on inactive markets and unlisted investments are determined using other generally
accepted valuation methods. Refer note 30 where more details of valuation techniques used are discussed.
The fair value changes of available-for-sale investments are reported in the statement of other comprehensive
income until such investments are sold, at which time the realised gains or losses are reported in the statement
of profit or loss.
The Company assesses at each statement of financial position date whether there is objective evidence that a
financial asset or a group of financial assets is impaired. In the case of equity securities classified as availablefor-sale, a significant or prolonged decline in the fair value of the securities below their cost is considered
as an indicator that the investments are impaired. If any such evidence exists for available-for-sale financial
assets, the cumulative loss measured as the difference between the acquisition cost and the current fair
value, less any impairment loss on those financial assets previously recognised is removed from equity and
recognised in the statement of profit or loss.
The investment fair value reserve represents the unrealised gains or losses on the valuation of available-forsale investments. In the event of sale or impairment, the cumulative gains or losses recognized in investment
fair value reserve are included in the statement of other comprehensive income for the year.
Investment income
Interest income on bonds is recognised on an accrual basis. Whereas dividend income are recognised when
the right to receive a dividend is established.
GENERAL
Property, plant and equipment
All property, plant and equipment are stated at cost less accumulated depreciation and provision for
impairment losses, if any, with the exception of freehold land which is stated at open market values, based on
periodical valuations conducted by external independent property valuers.
Expenditure subsequent to initial recognition is capitalised only when it increases future economic benefits
embodied in the item of property, plant and equipment. Repairs and renewals are charged to the statement of
profit or loss when the expenditure is incurred.
26
Notes to the
GENERAL (continued)
Depreciation
Depreciation is provided on historical cost using the straight line method, at annual rates which are intended to
write-off the cost of the assets over their estimated economic useful lives, as follows:
Building
20 years
Office equipment
4 years
Furniture and fixtures 4 years
Motor vehicles
4 years
Employees’ terminal benefits
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A provision is recognised for the amount expected to be paid under short-term
cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Post-employment benefits
Employee benefits and entitlements to annual leave, holiday, air passage and other short-term benefits are
recognised as they accrue to the employees. The Company contributes to the pension scheme for Bahraini
nationals administered by the Social Insurance Organisation in the Kingdom of Bahrain. This is a defined
contribution pension plan and the Company’s contributions are charged to the statement of profit or loss and
other comprehensive income in the year to which they relate. In respect of this plan, the Company has a legal
obligation to pay the contributions as they fall due and no obligation exists to pay the future benefits.
The expatriate employees of the Company are paid leaving indemnity in accordance with the provisions of the
Bahrain Labour Law. The Company accrues for its liability in this respect on an annual basis.
Treasury shares
Where the company purchases its own equity share capital, the consideration paid including any attributable
transaction costs are deducted from total shareholders’ equity as treasury shares until they are cancelled.
Where such shares are subsequently sold or reissued, any profit or loss is included in the statement of
changes in shareholders’ equity.
Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company’s entities are measured using the currency of the
primary economic environment in which the entity operates (the functional currency). The financial statements
are presented in Bahrain Dinars, which is the Company’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in the statement of profit or loss. Translation differences
on non-monetary items classified as available-for-sale financial assets are included in investments fair value
reserve.
27
Notes to the
Provisions
Provisions are recognised when the Company has an obligation (legal or constructive) arising from a past
event, and the costs to settle the obligation are both probable and able to be reliably measured. Provision for
leave pay and passage is recognised for employees at the statement of financial position date.
Impairment
The carrying amounts of the Company’s assets are reviewed at each statement of financial position date to
determine whether there is any indication of impairment. If any such indication exists, the recoverable amount
of the assets is estimated. An impairment loss is recognised whenever the carrying amount of an asset
exceeds its recoverable amount. All impairment losses are recognised in the statement of profit or loss.
Cash and cash equivalents
For the purpose of statement of cash flows, cash and cash equivalents comprise of cash on hand and bank
balances.
4. Critical accounting judgment and key source of estimation uncertainty
Preparation of the financial statements in accordance with IFRS requires the Company’s management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue
and expenses during the reporting period. The determination of estimates requires judgments which are
based on historical experience, current and expected economic conditions, and all other available information.
Actual results could differ from those estimates.
The most significant areas requiring the use of management estimates and assumptions relate to:
•
•
•
•
•
•
•
•
•
•
the ultimate liability arising from claims made under insurance contracts;
legal proceedings;
classification of investments;
fair valuation of available-for-sale investments;
impairment of available-for-sale investments;
fair value measurement;
economic useful lives of property, plant and equipment;
going concern;
provisions; and
contingencies
The ultimate liability arising from claims made under insurance contracts
The estimation of the ultimate liability arising from claims made under insurance contracts is the Company’s
most critical accounting estimate. There are several sources of uncertainty that need to be considered in the
estimate of the liability that the Company will ultimately pay for such claims. The estimations for claims incurred
but not reported (IBNR) uses statistical models including an estimation made to meet certain contingencies
such as unexpected and unfavorable court judgments which may require a higher payout than originally
estimated and settlement of claims, and which may take longer than expected, resulting in actual payouts
being higher than estimated.
28
Notes to the
4. Critical accounting judgment and key source of estimation uncertainty (continued)
Legal proceedings
The Company reviews outstanding legal cases following developments in the legal proceedings and at each
reporting date, in order to assess the need for provisions and disclosures in its financial statements. Among
the factors considered in making decisions on provisions are the nature of litigation, claim or assessment, the
legal process and potential level of damages in the jurisdiction in which the litigation, claim or assessment has
been brought, the progress of the case (including the progress after the date of the financial statements but
before those statements are issued), the opinions or views of legal advisers, experience on similar cases and
any decision of the Company’s management as to how it will respond to the litigation, claim or assessment.
Classification of investments
In the process of applying the Company’s accounting policies, management decides upon acquisition of an
investment, whether it should be classified as investments carried at fair value through statement of profit
or loss, held for maturity or available for sale investments. The classification of each investment reflects the
management’s intention in relation to each investment and is subject to different accounting treatments based
on such classification.
Fair valuation of available-for-sale investments
The Company determines fair values of available-for-sale investments that are not quoted in active markets
by using valuation techniques such as discounted cash flows and recent transaction prices. Fair value
estimates are made at a specific point in time, based on market conditions and information about the investee
companies. These estimates are subjective in nature and involve uncertainties and matters of significant
judgment and therefore, cannot be determined with precision. There is no certainty about future events
(such as continued operating profits and financial strengths). It is reasonably possible, based on existing
knowledge, that outcomes within the next financial year that are different from assumptions could require a
material adjustment to the carrying amount of the available-for-sale investments. In case where discounted
cash flow models have been used to estimate fair values, the future cash flows have been estimated by the
management based on information from and discussions with representatives of the management of the
investee companies, and based on the latest available audited and un-audited financial statements.
Impairment of available-for-sale investments
The Company determines that available-for-sale investments are impaired when there has been a significant
or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged
requires judgment and is assessed for each investment separately. The Company considers a decline of more
than 30% in the fair value below cost to be significant and considers a decline below cost which persists for
more than 6 months as prolonged.
Fair value measurement
A number of assets and liabilities included in the financial statements require measurement at, and/or
disclosure of, fair value.
The fair value measurement of the Company’s financial and non-financial assets and liabilities utilises market
observable inputs and data as far as possible. Inputs used in determining fair value measurements are
categorised into different levels based on how observable the inputs used in the valuation technique utilised
are (the ‘fair value hierarchy’):
Level 1: Quoted prices in active markets for identical items (unadjusted)
Level 2: Observable direct or indirect inputs other than Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that has
a significant effect on the fair value measurement of the item and transfers of items between levels are
recognised in the period they occur.
The financial assets and financial liabilities of the Company that either require fair value measurements or only
fair value disclosures as at 31 December 2014 are disclosed in Note 30.
29
Notes to the
4. Critical accounting judgment and key source of estimation uncertainty (continued)
Economic useful lives of property, plant and equipment
The Company property, plant and equipment are depreciated on a straight-line basis over their economic
useful lives. Economic useful lives of property, plant and equipment are reviewed by management quarterly.
The review is based on the current condition of the assets and the estimated period during which they will
continue to bring economic benefit to the Company.
Provisions
At 31 December 2014, in the opinion of the Company management, a provision of BD379,977 (2013:
BD300,739) is required towards impaired policyholders and insurance companies receivables. When
evaluating the adequacy of the provision for impaired receivables, management bases its estimate on current
overall economic conditions, ageing of the receivables balances, historical write-off experience, customer
creditworthiness and changes in payment terms. Changes in the economy, industry or specific customer
conditions may require adjustments to the provision for impaired policyholders and insurance companies
receivables recorded in the financial statements.
Going concern
The management of the Company reviews the financial position on a periodical basis and assesses the
requirement of any additional funding to meet the working capital requirements and estimated funds required
to meet the liabilities as and when they become due. In addition, the shareholders of the Company ensure that
they provide adequate financial support to fund the requirements of the Company to ensure the going concern
status of the Company.
Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The
assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the
outcome of future events.
5. Cash and bank balances
Cash on hand
Current account balances with banks
31 December
2014
31 December
2013
8,541,345
4,248,669
8,542,545
4,249,869
1,200
1,200
The bank balances are held in non-interest bearing current accounts.
6. Statutory deposit
Statutory deposits are maintained under the regulations of the Central Bank of Bahrain and Financial
Institutions Law, 2006. Such deposits, which depend on the nature of the insurance business and the
number of branches, cannot be withdrawn except with the approval of the Central Bank of Bahrain. A sum of
BD125,000 (2013: BD125,000) has been deposited with National Bank of Bahrain in the name of the Company
and for the order of Central Bank of Bahrain and carries a fixed rate of return.
30
Notes to the
7. Available-for-sale investments
Opening balance
31 December
2014
17,433,795
31 December
2013
17,688,050
Additions during the year
5,689,080
8,714,560
Disposals during the year
(9,440,190)
(9,552,855)
(486,100)
-
Unrealised fair value (losses)/gains recognised in statement of other
comprehensive income
Impairment losses for the year
(1,511,625)
584,040
Closing balance
11,684,960
17,433,795
31 December
2014
31 December
2013
294,205
-
780,305
-
Impairment loss recognised in statement of profit or loss is as below:
Impairment loss on available-for-sales investments
Net movement through investment fair value reserve in statement of other
comprehensive income
486,100
-
The Company has performed an impairment test over the available-for-sale investments and concluded that
certain of those investments are impaired. Accordingly, an impairment loss of BD780,305 (2013: BDNil) has
been charged to the statement of profit or loss.
Analysis of available-for-sale investments
Equity instruments listed on stock exchanges
31 December
2014
4,999,455
31 December
2013
10,453,000
Quoted bonds
5,030,250
5,325,540
Unquoted equity investments
1,655,255
1,655,255
11,684,960
17,433,795
UAE Dirham
2014
3,100,480
2013
United States Dollar
3,082,420
5,312,770
Saudi Riyal
1,729,620
3,372,600
Bahrain Dinar
1,655,255
1,655,255
Iraqi Dinar
1,108,620
1,594,720
984,915
4,979,150
Available-for-sale investments are denominated in the following currencies:
Currency
Qatari Riyal
Omani Riyal
-
23,650
519,300
11,684,960
17,433,795
31 December
2014
31 December
2013
(259,977)
(240,739)
2,276,198
2,038,762
8. Policyholders’ receivables
Policyholders’ receivables
Provision for impaired receivables
Policyholders’ receivables are generally on 90 to 120 days credit terms.
31
2,536,175
2,279,501
Notes to the
8. Policyholders’ receivables (continued)
The movement in provision for impaired receivables is as follows:
Opening balance
31 December
2014
31 December
2013
19,238
125,086
259,977
240,739
240,739
Provision made in the current year
Closing balance
115,653
The ageing of policy holders’ receivables not provided for is as follows:
Current
0 to 120 days
2014
Overdue and not impaired
2013
2014
2013
-
575,598
165,584
-
396,149
874,893
-
-
251,005
245,804
1,053,446
752,481
1,222,752
1,286,281
1,053,446
752,481
121 to 180 days
-
181 to 365 days
-
365 and above
-
-
The fair values of policyholders’ receivables are expected, on the basis of past experience, to be fully
recoverable. It is not the practice of the Company to obtain collateral over receivables and the vast majority
are, therefore, unsecured.
9. Insurance and reinsurance companies receivables
Insurance and reinsurance companies receivables
31 December
2014
31 December
2013
(120,000)
(60,000)
1,501,381
1,406,561
1,621,381
Provision for impaired receivables
1,466,561
Two companies account for 29% (2013: 43%) of the total insurance balances receivable as at 31 December
2014. Arrangements with insurers normally require settlement on a quarterly basis.
31 December
2014
Opening balance
60,000
Provision made in the current year
Provision written-back during the year
Closing balance
31 December
2013
8,002
60,000
60,000
-
(8,002)
120,000
60,000
The ageing of insurance and reinsurance companies’ receivables are as follows:
Current
0 to 120 days
2014
2013
Overdue and not impaired
2014
2013
-
191,378
139,738
-
390,674
254,888
-
-
536,672
768,957
382,657
242,978
1,118,724
1,163,583
382,657
242,978
121 to 180 days
-
181 to 365 days
-
365 and above
-
-
All insurance and reinsurance companies’ receivables are expected, on the basis of past experience, to be
fully recoverable. It is not the practice of the Company to obtain collateral over insurance and reinsurance
receivables.
32
Notes to the
10. Deferred reinsurance premiums
The movement in deferred reinsurance premiums during the year ended 31 December 2014 is as follows:
Fire,
General
Accident
and
Engineering
Marine and
Aviation
69,045
1,012,964
230,272
2,097,543
2,052,039
Reinsurance premium
deferred
554,034
73,524
733,957
407,309
1,768,824
2,097,543
Reinsurance premium
released
(785,262)
(69,045)
(1,012,964)
(230,272)
(2,097,543)
(2,052,039)
554,034
73,524
733,957
407,309
1,768,824
2,097,543
Fire,
General
Accident
and
Engineering
Marine and
Aviation
Life and
Medical
84,913
Motor
84,814
2014
Total
225,920
2013
Total
197,394
45,078
5,941
123,883
141,498
316,400
225,920
Commission paid
(49,963)
(6,230)
(84,913)
(84,814)
(225,920)
(197,394)
Closing balance
45,078
5,941
123,883
141,498
316,400
225,920
Opening balance
Closing balance
785,262
Life and
Medical
Motor
2014
Total
2013
Total
11. Deferred policy acquisition costs
Opening balance
Commission incurred
49,963
6,230
12. Other receivables
Accrued interest
Deposit with Third Party Administrator (TPA)
Prepaid expenses
Other receivables
31 December
2014
31 December
2013
156,901
256,901
24,947
28,685
54,250
81,800
23,144
27,684
259,242
395,070
Other receivables are not considered impaired and expected, on the basis of past experience, to be fully
recoverable within 12 months from the statement of financial position date.
13. Outstanding claims recoverable from reinsurers
31 December
2014
31 December
2013
Additions during the year
2,364,384
3,643,048
Received during the year
(1,880,043)
(3,709,664)
2,359,009
1,874,668
Opening balance
Closing balance
1,874,668
1,941,284
All outstanding claims recoverable from reinsurers are not considered impaired and are expected, on the basis
of past experience, to be fully recoverable.
33
Notes to the
14. Property, plant and equipment
Cost
At 31 December 2012
Additions
At 31 December 2013
Land
and
Building
Furniture,
Fixtures, and
Office
Equipment
Motor
Vehicles
Total
852,911
194,346
14,600
1,061,857
-
15,342
-
15,342
852,911
209,688
14,600
1,077,199
Additions
-
29,601
-
29,601
Disposals
-
(4,800)
-
(4,800)
At 31 December 2014
852,911
234,489
14,600
1,102,000
At 31 December 2012
52,911
176,408
14,600
243,919
Accumulated depreciation
Charge for the year
At 31 December 2013
Charge for the year
Disposals
-
22,172
-
22,172
52,911
198,580
14,600
266,091
-
8,111
-
8,111
-
(4,800)
-
(4,800)
At 31 December 2014
52,911
201,891
14,600
269,402
At 31 December 2014
800,000
32,598
-
832,598
Net book amount
At 31 December 2013
800,000
11,118
-
811,108
During December 2012, the Company obtained an open market valuation of land from an independent real
estate valuer, which reflected the total value of the land at BD825,353 resulting in an unrealised fair value gain
amounting to BD25,353. However, on a conservative basis, the management of the Company has taken a
decision not to include fair value reserve in the statement of changes in equity.
The Company also operates from premises leased at a monthly rent as prescribed in below mentioned table:
Premise
Rent (Per month)
Head office, Bahrain Chamber of Commerce
4,099
West Riffa
1,200
Sitra branch
650
34
Notes to the
15. Outstanding claims reserve
The movement in the outstanding claims reserve during the year ended 31 December is as follows:
Fire,
General
Accident
and
Engineering
Marine and
Aviation
Life and
Medical
530,774
4,127,550
6,149,950
6,603,080
909,548
18,458
1,874,025
3,426,857
6,228,888
6,022,320
Claims paid
(343,866)
(42,098)
(1,840,535)
(3,484,703)
(5,711,202)
(6,475,450)
Closing balance
1,902,332
131,336
564,264
4,069,704
6,667,636
6,149,950
Opening balance
1,336,650
Claims incurred
154,976
Motor
2014
Total
2013
Total
The gross outstanding claims reserve at 31 December is as follows:
749,255
29,895
419,208
1,610,081
2,808,439
2,326,226
Prior year claims
Current year claims
1,135,697
100,283
144,465
2,093,207
3,473,652
3,544,774
Incurred but not
Reported
17,380
1,158
591
366,416
385,545
278,950
1,902,332
131,336
564,264
4,069,704
6,667,636
6,149,950
Closing balance
16. Unearned gross premiums
The movement in unearned gross premiums during the year ended 31 December is as follows:
Fire,
General
Accident
and
Engineering
Marine and
Aviation
89,898
1,487,816
2,168,585
4,650,733
4,342,557
Premiums received
652,307
93,386
1,077,981
2,567,875
4,391,549
4,650,733
Premiums released
(904,434)
(89,898)
(1,487,816)
(2,168,585)
(4,650,733)
(4,342,557)
652,307
93,386
1,077,981
2,567,875
4,391,549
4,650,733
Fire,
General
Accident
and
Engineering
Marine and
Aviation
Life and
Medical
Motor
2014
Total
2013
Total
Opening balance
Closing balance
904,434
Life and
Medical
Motor
2014
Total
2013
Total
17. Unearned commissions
Opening balance
Commission received
Commission earned
Closing balance
35
187,755
23,947
133,033
68,704
413,439
328,292
172,090
25,814
132,395
99,370
429,669
413,439
(187,755)
(23,947)
(133,033)
(68,704)
(413,439)
(328,292)
172,090
25,814
132,395
99,370
429,669
413,439
Notes to the
18. Other technical provisions
Other technical provisions represent provision for amounts received from reinsurance companies for settlement
of their share of outstanding claims for certain underwriting years, which extinguishes their liabilities in respect
of such underwriting years.
19. Other payables
31 December
2014
31 December
2013
Unclaimed dividends
311,919
312,825
Accrued expenses and other payables
516,308
450,474
66,527
59,585
1,151,484
1,071,597
Garage payables
Provision for leave salary and air passage
256,730
248,713
During the year 2013, an excess provision no longer payable to Damac Invest Co. (L.L.C.) relating to
investment advisory fees amounting to BD49,964 has been transferred to other income.
20. Employees’ terminal benefits
Local employees
The contributions made by the Company towards the pension scheme for Bahraini nationals administered by
the Social Insurance Organisation in the Kingdom of Bahrain for the year ended 31 December 2014 amounted
to BD84,121 (2013: BD72,023).
Expatriate employees
The movement in leaving indemnity liability applicable to expatriate employees are as follows:
Opening balance
Accruals for the year
Payments during the year
Closing balance
Number of staff employed by the Company
31 December
2014
115,087
31 December
2013
115,494
16,996
19,527
(515)
(19,934)
131,568
115,087
68
67
36
Notes to the
21. Share capital
Authorised share capital
31 December
2014
31 December
2013
10,000,000
10,000,000
6,188,663
6,188,663
100,000,000 shares of 100 fils each
(2013: 100,000,000 shares of 100 fils each)
Issued and fully paid-up share capital
61,886,630 shares of 100 fils each
(2013: 61,886,630 shares of 100 fils each)
3,724
Treasury shares
3,724
Additional information on shareholding pattern
i)
The names and nationalities of the major shareholders holding 5% or more are as follows:
Damac Invest Co. (L.L.C.)
Nationality
United Arab Emirates
Number
of shares
Percentage
of holding
interest
24,035,714
38.84%
Mustafa Ahmed Salman
Oman
5,312,017
8.58%
Taqi Mohamed Al Baharna
Bahrain
3,560,160
5.75%
Others
-
28,978,739
46.83%
61,886,630
100%
ii) The Company has only one class of equity shares and the holders of the shares have equal voting rights.
iii) The distribution of the Company’s equity shares, i.e. the number of holders and their percentage shareholdings as at 31 December 2014 is set out below:
Less than 1%
2,359
Number
of shares
20,369,349
Percentage
of total
outstanding
shares
7
8,609,390
14%
Number
of shareholders
More than 1% up to less than 5%
33%
3
32,907,891
53%
2,369
61,886,630
100%
More than 5%
iv) Details of the directors’ interests in the Company’s shares are as follows:
Name of the directors
2014
2013
Dr Osama Taqi Al Baharna
242,527
242,527
Adel Hassan Alaali
187,110
187,110
Sofyan Adnan Khatib
37
Number of shares
206,289
206,289
635,926
635,926
Notes to the
22. Statutory reserve
As required by the Bahrain Commercial Companies Law Decree no.21 of 2001, an amount equivalent to 10%
of the Company’s net profit for the year has been transferred to the statutory reserve. The Company may
resolve to discontinue such annual transfers when the reserve equals 50% of the paid-up share capital of the
Company. The reserve cannot be utilised for the purpose of distribution, except in such circumstances as
stipulated in the Bahrain Commercial Companies Law Decree Number 21 of 2001. During the year, an amount
of BD169,600 (2013: BD251,647) has been transferred to the statutory reserve.
23. Fair value reserve
The fair value reserve includes the gains and losses arising from changes in fair value of available-forsale investments and is recognised in the statement of other comprehensive income. During the year, net
movement in investment fair value reserve of BD2,231,670 (2013: BD345,825) was recorded.
Revaluation reserve
The fair value reserve includes the net surplus arising on revaluation of freehold land (Note 14). This reserve is
not available for distribution.
24. Directors’ remuneration and dividends
Directors’ remuneration
Proposed by the Board of Directors
The Board of Directors of the Company have proposed no directors’ remuneration for the year ended 31
December 2014 (2013: BD30,000). This is subject to the approval of shareholders in the Annual General
Meeting.
Dividends
Declared and paid
A dividend of BD309,247 representing 5% of the total issued and fully paid-up share capital of the Company
for the year ended 31 December 2013 at 5fils per share (2013: BDNIl for the year ended 31 December 2012)
was approved by the shareholders in the Annual General Meeting of the shareholders held on 31 March 2014,
declared and subsequently paid.
Proposed by the Board of Directors
The Board of Directors of the Company have proposed a cash dividend of BD2,473,976 at 40fils per share
(2013: BD309,247 at 5fils per) representing 40% of the total issued and fully paid-up share capital of the
Company for the year ended 31 December 2014. The proposed dividend only becomes payable once it has
been approved by the shareholders in the Annual General Meeting and, accordingly, the proposed dividend
has not been accounted for in these financial statements.
38
Notes to the
25. Segmental underwriting results
The Company’s insurance business is organised into four main business segments as follows:
•
•
•
•
Fire, general accident and engineering
Marine cargo, marine hull and aviation
Life and medical expense cover
Motor - Third party liability and comprehensive
31 December 2014
Fire and
General
Accident
and
Engineering
Marine and
Aviation
879,901
2,717,143
Reinsurance ceded
(2,111,623)
(839,555)
(2,130,064)
(463,233)
Retained premiums
211,341
40,346
587,079
4,398,146
32,957
991
130,828
(234,311)
Gross premiums
Adjustment in unearned premium
2,322,964
Life and
Medical
Motor
4,861,379
Net premiums earned
244,298
41,337
717,907
4,163,835
Net earned commission
income/(expense)
349,380
90,844
97,910
(81,814)
Total
10,781,387
(5,544,475)
5,236,912
(69,535)
5,167,377
456,320
Net claims incurred
(104,741)
1,543
(536,654)
(3,224,461)
Management expenses
(117,647)
(44,563)
(137,610)
(246,204)
Provision on insurance and reinsurance receivables
-
-
-
-
-
-
-
-
81,053
371,290
89,161
141,553
611,356
1,215,175
2,262,464
192,564
1,264,843
Loss ratios
Identifiable assets
Identifiable liabilities
(43%)
2,728,641
(4%)
250,510
(75%)
1,741,103
(77%)
724,362
6,768,600
(3,864,313)
(546,024)
(79,238)
(75%)
4,444,233
11,488,854
Assets amounting to BD25,221,924 and liabilities amounting to BD2,714,302 are not specifically identifiable
with general and life insurance business.
39
Notes to the
25. Segmental underwriting results (continued)
31 December 2013
Fire and
General
Accident
and
Engineering
Marine and
Aviation
935,619
4,106,736
Reinsurance ceded
(1,866,693)
(888,815)
(3,069,751)
(506,619)
Retained premiums
228,147
46,804
1,036,985
3,765,444
1,683
(1,309)
(15,305)
(247,741)
Gross premiums
Adjustment in unearned premium
2,094,840
Life and
Medical
Motor
4,272,063
Net premiums earned
229,830
45,495
1,021,680
3,517,703
Net earned commission
income/(expense)
345,342
162,772
(15,305)
(36,098)
Net claims incurred
Management expenses
Loss ratios
Identifiable assets
Identifiable liabilities
11,409,258
(6,331,878)
5,077,380
(262,672)
4,814,708
456,711
(9,271)
(822)
(704,944)
(2,988,822)
(99,714)
(44,535)
(195,481)
(203,351)
-
-
-
-
(177,084)
466,187
162,910
105,950
289,432
847,395
2,001,025
200,462
1,504,880
491,764
4,198,131
Provision on insurance and
re-insurance receivables
Total
(4%)
2,428,839
(2%)
268,821
(69%)
2,151,623
(85%)
6,364,839
(3,703,859)
(543,081)
(77%)
11,214,122
Assets amounting to BD26,460,165 and liabilities amounting to BD3,166,259 are not specifically identifiable
with general and life insurance business.
26. Net investment and other income
Year ended
31 December
2014
Year ended
31 December
2013
Dividend income
624,950
774,715
Interest income
332,000
432,686
87,247
54,181
(780,305)
-
1,299,862
2,483,692
Realised gains on sale of available-for-sale investments
Other income
Impairment losses on available-for-sale investments
1,035,970
1,222,110
40
Notes to the
27. General and administrative expenses
Employee related costs
Year ended
31 December
2014
Year ended
31 December
2013
231,891
198,111
4,867
13,303
819,034
814,622
Year ended
31 December
2014
Year ended
31 December
2013
61,840,216
61,840,216
27fils
41fils
582,276
Administrative and other costs
Depreciation
603,208
28. Earnings per share
1,696,003
Weighted average number of shares outstanding
Basic and diluted earnings per 100 fils share
2,516,465
The earnings per share has been computed on the basis of net profit for the year divided by the number of
shares outstanding for the year, net of 46,416 treasury shares. The Company does not have any potentially
dilutive ordinary shares, hence the diluted earnings per share and basic earnings per share are identical.
29. Related party balances and transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Related parties include entities over
which the Company exercises significant influence, major shareholders, directors and executive management
of the Company. The Company’s transactions with related parties are on arm’s length basis and authorised by
the management.
A summary of the significant transactions with related parties is as follows:
Related party relationship
Year ended
31 December
2014
Year ended
31 December
2013
Directors remuneration
Directors
-
Premium earned
Directors
41,201
44,737
Claims incurred
Directors
240,122
45,000
During the year 2013, an excess provision no longer payable to Damac Invest Co. (L.L.C.) relating to
investment advisory fees amounting to BD49,964 has been transferred to other income.
41
30,000
Notes to the
30. Insurance contracts, financial instruments and risk management
The risks involved in the business activities and the Company’s approach to managing such risks is elaborated
below:
•
•
•
•
Insurance risk management
Financial risk management
® Market risk:
- Currency risk
- Interest risk
- Price risk
® Credit risk
® Liquity risk
® Other risks:
- Regulatrory risk
- Legal risk
Capital management
Fair value measurement
This note presents information about the Company’s exposure to each of the above risks, the Company’s
objectives, policies and processes for measuring and managing risk, and the Company’s management of
capital. Further quantitative disclosures are included throughout these financial statements.
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk
management framework and, whilst retaining ultimate responsibility for them, it has delegated the authority for
designing and operating processes that ensure the effective implementation of the objectives and policies to
the Company’s finance function. The Board receives monthly reports from the Company’s Financial Controller
through which it reviews the effectiveness of the processes put in place and the appropriateness of the
objectives and policies it sets.
The overall objective of the Board is to identify and analyse the risks faced by the Company, to set appropriate
risk limits and controls, and to monitor risks and adherence to limits.
(i) Insurance risk management
Insurance risk comprises the possibility that an insured event occurs, and the uncertainty of the amount of the
resulting claim. By the very nature of an insurance contract, this risk is random and, therefore unpredictable.
The primary risk that the Company faces under such contracts is that the actual claims and benefits payments
exceed the carrying amount of insurance liabilities.
The primary risk control measure in respect of insurance risk is the cession of the risk to third parties via
reinsurance, including excess of loss protection programme. Reinsurance business ceded is to a number
of international reputable third party insurers on a proportional basis with retention limits, varying by lines
of business and geographical areas. The Company is not dependent on a single reinsurer or a reinsurance
contract.
In addition, insurance risk is mitigated by:
•
The Company’s diverse portfolio of insurance contracts. Accordingly, the Company is less likely to be
adversely affected by a single unexpected event.
•
The Company’s binding (underwriting and retention) guidelines and limits, and the underwriting authorities’
control over who is authorised and accountable for concluding insurance and reinsurance contracts.
Compliance with these guidelines is closely monitored by the management. Developments in the global
and local markets are also monitored closely and where necessary appropriate changes are made to the
Company’s policy and guidelines to reflect current best practices.
•
All the Company’s insurance contracts contain specific liability limits.
42
Notes to the
30. Insurance contracts, financial instruments and risk management (continued)
(i) Insurance risk management (continued)
Claims development
The development of gross insurance liabilities provides a measure of the Company’s ability to estimate the
ultimate value of claims. The following table illustrates the Company’s estimate of total claims outstanding for
the years 2009 to 2014:
Underwriting years
Estimate of ultimate
claims:
At end of each reporting
year
One year later
Two years later
Three years later
Four years later
Five years later
Estimate of cumulative
claims
Less: Cumulative
payments to date
Liability recognised
in the statement of
financial position
Add: Claims Incurred
but IBNR Cliams in
respect of 2014
Add: Claims in respect
of years prior to 2009
At 31 December 2014
2009
2010
2011
2012
2013
2014
7,242,907
9,045,486 10,044,325
4,112,917
6,885,832
7,285,225
8,480,468 10,131,357
4,820,148
6,701,931
7,378,563
8,991,195 10,201,127
4,782,250
6,974,940
-
9,251,514 10,197,235
4,586,430
-
-
9,128,588
9,938,772
-
-
-
8,478,077
-
-
-
-
8,478,077
9,938,772
4,586,430
6,974,940
7,378,563
Total
44,616,692
37,512,467
-
30,949,512
-
24,035,179
-
-
19,067,360
-
8,478,077
7,242,907
44,599,689
(8,301,336) (9,346,660) (3,906,967) (6,490,691) (6,119,763) (4,434,468) (38,599,885)
176,741
592,112
679,463
484,250
1,258,800
5,999,805
2,808,439
383,359
284,473
6,667,636
Claims in respect of years prior to 2009 are pending completion subject to receipt of all the necessary
documentation. These claims are substantially reinsured at 31 December 2014.
Reinsurance risk
Although the Company has reinsurance arrangements, it is not relieved of its direct obligations to its policy
holders and thus a credit risk exposure remains with respect to reinsurance ceded to the extent that any
reinsurer is unable to meet its obligations under such reinsurance arrangements. The Company reinsures
business only with parties that have good credit ratings; such credit ratings are reviewed on a regular basis.
A geographical analysis of the Company’s reinsurance exposure at 31 December is provided below:
Geographical region
Middle East
31 December
2014
1,480,607
31 December
2013
1,286,707
Europe
585,602
320,706
Rest of the world
292,800
267,255
2,359,009
1,874,668
The five largest reinsurers account for 54% of the maximum credit exposure at 31 December 2014 (2013: 67%).
Reinsurance recoveries under each business segment are as follows:
43
Notes to the
30. Insurance contracts, financial instruments and risk management
(i) Insurance risk management (continued)
Outstanding claims recoverable from reinsurers under each business segment
31 December
2014
31 December
2013
Marine and Aviation
113,099
125,187
Life and Medical
407,003
407,003
Fire, General Accident and Engineering
1,663,352
Motor
1,165,800
175,555
176,678
2,359,009
1,874,668
(ii) Financial risk management
Financial instruments consist of financial assets and financial liabilities.
Financial assets of the Company include cash and bank balances, statutory deposits, available-for-sale
investments and receivables from policyholders, insurance and reinsurance companies.
Financial liabilities of the Company include payables and other liabilities to policyholders, insurance and
reinsurance companies and other parties.
The Company does not use any derivative financial instruments.
The table below sets out the company’s classification of each class of financial assets and liabilities, and their
fair values.
2014
Loans and
Availablereceivables
for-sale
-
8,542,545
Statutory deposit
-
125,000
Other
amortised
cost
Total
carrying
value
Fair
value
-
8,542,545
8,542,545
-
125,000
125,000
11,684,960
-
-
11,684,960
11,684,960
Receivables
-
3,934,480
-
3,934,480
3,934,480
Reinsurer’s share of outstanding Claims
-
2,359,009
-
2,359,009
2,359,009
11,684,960
14,961,034
-
6,667,636
Insurance payables
-
-
1,461,250
Other liabilities
-
-
568,649
568,649
568,649
Total financials liabilities
-
-
8,697,535
8,697,535
8,697,535
Total financial assets
Outstanding claims
-
-
26,645,994 26,645,994
6,667,636
6,667,636
1,461,250
1,461,250
44
Notes to the
(ii) Financial risk management (continued)
2013
Availablefor-sale
Statutory deposit
4,249,869
-
Total
carrying
value
4,249,869
Fair
value
4,249,869
-
125,000
-
125,000
125,000
-
-
17,433,795
17,433,795
-
3,702,224
-
3,702,224
3,702,224
-
1,874,668
17,433,795
9,951,761
-
6,149,950
Reinsurer’s share of outstanding Claims
Outstanding claims
-
Other
amortised
cost
17,433,795
Receivables
Total financial assets
Loans and
receivables
-
-
1,874,668
1,874,668
27,385,556
27,385,556
6,149,950
6,149,950
Insurance payables
-
-
1,898,522
1,898,522
1,898,522
Other liabilities
-
-
561,538
561,538
561,538
Total financials liabilities
-
-
8,610,010
8,610,010
8,610,010
Market Risk
Market risk is the risk that the value of a financial instrument will fluctuate due to changes in currency rate,
interest rate, and equity price risk. The Company closely monitors the market forces and suitably revises the
strategy to minimize the market risk
Currency rate risk
Currency rate risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign
exchange rates.
The Bahrain Dinar is effectively pegged to the United States Dollar, thus currency rate risk occurs only in
respect of other currencies. The Company does not hedge against such currency rate risks.
The table below summarises the exposure to currency rate risk excluding assets and liabilities arising from
insurance and reinsurance contracts.
Net open positions (in Bahrain Dinar equivalent)
31 December
2014
31 December
2013
Iraqi Dinars
1,108,620
1,594,720
Other GCC currencies
7,493,920
10,526,305
11,684,960
17,433,795
United States Dollars
3,082,420
5,312,770
The analysis calculates the effect of a reasonably possible movement of the Bahrain Dinar against Iraqi Dinars
with all the other variables held constant in the statement of profit or loss. Foreign exchange sensitivity analysis
is as follows:
Currency
Iraqi Dinars
Iraqi Dinars
45
Change
Impact on profit
+/-3%
+/-47,841
+/-5%
+/-79,736
Notes to the
Market Risk (continued)
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market
interest rates.
The Company invests in bonds that are subject to interest rate risk. Interest rate risk to the Company is the
risk of changes in market interest rates reducing the overall return on its interest-bearing securities. The
Company limits interest rate risk by monitoring changes in interest rates in the currencies in which its cash
and investments are denominated. The impact of any change in the market interest rates on the profits of the
Company is not expected to be material by management.
Price risk
Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market
prices, whether those changes are caused by factors specific to the individual security, or its issuer, or factors
affecting all securities traded in the market.
The Company is exposed to market risk with respect to its investments in equities, managed funds and bonds.
The Company limits market risk by maintaining a diversified portfolio and by continuous monitoring of
developments in international equity and bond markets. In addition, the Company actively monitors the key
factors that affect stock market movements, including analysis of the operational and financial performance of
investees.
Geographical concentration of investments
Kingdom of Bahrain
Middle East
31 December
2014
1,650,000
31 December
2013
1,650,000
10,034,960
15,783,795
11,684,960
17,433,795
Investment fair value sensitivity analysis is as follows:
Description
Available for-sale-investment
Available for-sale-investment
Change Impact on equity
+/-5%
+/- 584,248
+/-10%
+/-1,168,496
46
Notes to the
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the
other party to incur a financial loss. The Company adopts policies and procedures in order to maintain credit
risk exposures within limits. These limits have been set on the basis of the types of exposures and the credit
rating of the counter party and hence the Company is of the opinion that no credit loss will occur. Substantially
all of the Company’s underwriting activities are carried out in the Kingdom of Bahrain.
Further, a significant portion of the Company’s cash and bank balances, time deposits and investments are
placed with institutions in the Kingdom of Bahrain and Europe. Credit risk on premiums receivable is limited
to policyholders in Bahrain. Credit risk on insurance balances receivable is substantially on major reinsurance
companies located in the Arabian Gulf States, Middle East and Europe.
Liquidity risk
Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments
associated with financial liabilities. Liquidity requirements are monitored on a regular basis and management
ensures that sufficient funds are available to meet any commitments and liabilities as they arise.
The Company does not have any long-term borrowings. Other financial liabilities are due for payment within 12
months of the statement of financial position.
Other risks
Regulatory risk
Regulatory risk is the risk of non-compliance with regulatory and legal requirements in the Kingdom of Bahrain.
The Company’s Compliance Department is currently responsible for ensuring all regulations are adhered to.
Legal risk
Legal risk includes the risk of unexpected losses from transactions and/or contracts not being enforceable
under applicable laws or from unsound documentation. The Company deals with several external law firms to
support it in managing the legal risk.
(iii) Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. The Board of Directors monitors the return
on capital, which the Company defines as net operating income divided by total shareholders’ equity. The
Company’s objectives for managing capital are:
•
•
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns
for shareholders and benefits for other stakeholders, and
to provide an adequate return to shareholders by pricing products and services commensurately with the
level of risk.
The Company is supervised by regulatory bodies that set out certain minimum capital requirements. It is the
Company’s policy to hold capital as an aggregate of the capital requirement of the relevant supervisory body
and a specified margin, to absorb changes in both capital and capital requirements.
The Company manages the capital structure and makes adjustments to it in the light of changes in economic
conditions and the risk characteristics of the underlying assets. There were no significant changes in the
Company’s approach to capital management during the year.
In addition the Company maintains adequate capital and solvency margin as determined by the provisions of
Capital Adequacy Module of the Insurance Rulebook Volume 3.
47
Notes to the
(iv) Fair value measurement
Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Financial instruments not measured at fair value on recurring basis include insurance and other receivables
excluding prepayments, cash and bank balances, statutory deposits and insurance and other payables. In the
opinion of the management, due to the short-term nature of these financial instruments, the fair value of these
financial instruments is not significantly different from their carrying amounts as at 31 December 2014.
The following table sets out the fair value hierarchy of financial instruments measured at fair value on recurring
basis along with valuation techniques and significant unobservable imputes used in determining the fair value
measurement of financial instruments as well as the inter-relationship between observable inputs and fair
value:
Land
Fair value
at 31
December Level of
2014 hierarchy
Valuation
technique used
and key inputs
Significant
unobservable
inputs
Inter-relationship
between
unobservable
inputs and fair
value
Not applicable
Not applicable
800,000
L3
Independent
valuation reports
obtained in 2012
Current market
rates and rate per
sq.mtr
Available-forsale investments
10,029,705
L1
Quoted prices from
stock exchanges
Unquoted
available-forsale investments
1,655,255
L3
Net assets valuation Expected exit
rates, expected
future cash flows,
net assets and
expected profits
based taking
into account
management
knowledge and
experience of
market conditions
similar to industry
trends.
Higher the rate per
sq.mtr, the higher
the fair market
value
The higher the
future cash flows
or profits the higher
the fair value of
net assets and
eventually higher
exit rates.
48
Notes to the
(iv) Fair value measurement (continued)
Land
Fair value
at 31
December Level of
2013 hierarchy
Valuation
technique used
and key inputs
Significant
unobservable
inputs
Inter-relationship
between
unobservable
inputs and fair
value
Not applicable
Not applicable
800,000
L3
Independent
valuation reports
obtained in 2012
Available-forsale investments
15,778,540
L1
Quoted prices from
stock exchanges
Unquoted
available-forsale investments
1,655,255
L3
Net assets valuation Expected exit
rates, expected
future cash flows,
net assets and
expected profits
based taking
into account
management
knowledge and
experience of
market conditions
similar to industry
trends.
Current market
rates and rate per
sq.mtr
Higher the rate per
sq.mtr, the higher
the fair market
value
The higher the
future cash flows
or profits the higher
the fair value of
net assets and
eventually higher
exit rates.
There are no transfers between levels during the year.
31. Contingent liabilities
The Company is a defendant in a number of cases brought by policy holders in respect of claims which the
Company disputes. While it is not possible to predict the eventual outcome of such legal actions, the directors
have made provisions which, in their opinion, are adequate.
32. Subsequent events
There were no significant events subsequent to 31 December 2014 and occurring before the date of signing of
the financial statements that would have a significant impact on these financial statements.
33. Comparative figures
Certain comparative figures of the previous year have been reclassified, wherever necessary, to conform with
the current year’s presentation. Such regrouping does not affect net worth or net profit for the previous year.
49

annual report 2014 - Al Ahlia Insurance

Transcription

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